Within the radio industry, a “wired” network is a network that delivers commercials at pre-set times on a pre-determined list of radio stations. This is in contrast with an “unwired” network which delivers commercials to a pre-determined list of radio stations but allows each individual radio station to determine when it will broadcast the commercials.
Each member of the network is called an “affiliate.” In the case of a wired network, the network contracts with each affiliate to broadcast the same commercial at a pre-set time, combines the audience of each affiliate at that time into a network commercial, and then sells the network commercial to national advertisers. (For example, if there are 400 affiliates each having an audience of 100 at 6 a.m., the 6 a.m. network commercial would have an audience of 400×100 or 40,000.)
In the marketplace for advertising, there are six basic choices: print, radio, outdoor, broadcast television, cable, and Internet. Advertising attempts to capture the attention of consumers through the focal points of “sight,” “sound,” and “motion.” Each of the six advertising choices has its strengths and weaknesses, but only broadcast television, cable and Internet have the ability to capture all three advertising focal points.
Radio stations, radio networks, broadcast television stations, and cable systems all broadcast commercials, and the commercials typically range from fifteen to thirty to sixty seconds in length. The price of a commercial will vary based upon, among other factors, the size of the audience reached by the medium. Audience size is measured by Nielsen for broadcast television and cable, and by Arbitron for radio stations and network radio.
Arbitron uses a diary method for measuring audience of radio stations. Arbitron mails diaries to listeners in each market, the listeners then record the stations that they listen to over the course of a one week period and then send the diaries back to Arbitron, and Arbitron tabulates the responses. (Arbitron is moving toward an electronic measuring tool called the Personal People Meter (“PPM”) and plans to implement PPM in the top 50 markets over the next several years, and has already implemented PPM in Philadelphia, Houston, New York, Chicago and Los Angeles later this year.) Arbitron will include the audience from a radio station's web stream provided that the radio station streams one hundred percent of everything broadcast terrestrially (i.e., over the radio spectrum) in its entirety (including commercials).
Radio networks use a separate audience measuring service offered by Arbitron called RADAR. Radio networks that subscribe to RADAR also must identify the radio stations that broadcast their commercials and the times that each station is scheduled to broadcast each commercial.
Many radio stations stream their entire broadcasts in real time over the Internet. Broadcast television and cable channels currently do not stream their broadcasts in real time over the Internet. This is due to the market exclusivity of the program (i.e., in order to watch a program a viewer has to tune into a particular station or cable channel, whereas over the Internet anyone anywhere could watch the program; if a viewer could watch “Desperate Housewives” or “Wheel of Fortune” in real time on a website, the market exclusivity disappears, and the wider the distribution of the program, the value of a program to an individual television station or cable system decreases). In radio, on the other hand, there is no market exclusivity for music and in fact different radio stations may play the same songs in the same market at the same time.
Many radio stations use the Scott Studios System in order to schedule the music that they broadcast. The music is stored in a music library consisting of a file server containing digital copies of the music. The music director schedules in advance the music that the station will broadcast and the time that the music will air. For the radio stations that stream their broadcasts, computers convert the radio broadcast into a digital feed which is then streamed onto the Internet.
Each radio station has a loyal, measured and identifiable listening audience which is currently listening to the station via radio or the Internet. Many radio stations also are affiliated with one or more radio networks, and thus are already familiar with network requirements. The Internet represents a means to capture additional listeners and viewers and draw them away from broadcast and cable television at the expense of broadcast and cable television.
Because Internet usage can be measured exactly in real time, the audience (usage) numbers are fully measurable. Therefore, analysis of how many people accessed the stream and for how long can be measured precisely in real time rather than audience estimates used in all other media. (Currently, audience measurement services take a sample of the market and extrapolate audience composition and demographics from the sample.) Advertisers have long asked for accurate real time measurement of who their commercials actually reach. The Internet allows a website to make these calculations.